Earnings trade idea on Barnes & Noble

a Look Both Ways approach

Ticker: $BKS

Long July 21/22/23 1×2 Split Call Ratio
Long July 20/19/18 1×2 Split Put Ratio
Trade cost right now: $.16 debit
Takes margin

As always, you will need to be prepared to hedge with stock if price flirts with the $18 or $23 level. This trade will be capped at a $1 profit (minus trade cost) if price moves past $19 or $22.

The Basket of stocks

I discuss frequently the various baskets of stocks that I manage & often get questions regarding them so I thought I would give a brief list here:

Earnings
This basket of stocks is for trades related to Earnings reports each quarter. These can be pre & post Earnings trades

Submarine Basket
I buy pullbacks in this basket & prefer stocks with Options. I often buy partial position & then sell Straddles/Strangles to build the position

Fab 5
I buy stocks (sometimes use only Options but rare) that are headed to test the $100 level

50/50
I short stocks that are 50% above the 50 SMA

an Earnings trade idea for Adobe

Earnings after the market close on 06/17

Trade Idea:

Long the June 67.5/70/72.5 1×2 Split Call Ratio
Short the June 62.5 Puts
Trade cost .06 right now
Trade takes margin until Friday (or until naked short pieces are closed)

You must be comfortable owning stock at $62.56

Note: to help with the breakdown of this trade idea, here is another way to view the strategy:

Long June 67.5/70 CS
Short June 72.5/62.5 Strangle

using RSI as a Buy/Sell signal

part of the Simple Approach series

One of the Earnings reports this past week was in $PVH Corp. The reaction was negative and it ended the week unable to overtake the $120 level. For those traders with no position, consider this Daily chart:

20140608-122030-44430858.jpg
Above you can see that RSI is probing the key 30 level. Notice what happened to price the past 2 times it probed this level. Using RSI as a Buy signal it looks like a spot to initiate a new long position. Use your own Stop setting according to your process.

Diversification

If you invest in the public stock market (& study, keep up with info on it) you have likely come across discussions regarding the importance of a diversified portfolio. I’m an active trader/investor so I have to be mindful of that given the number of positions I own (personal & for clients) to ensure that I keep a good balance.

Sometimes the diversification is across asset types but should also include a Global view. For some examples I will list some stocks/ETFs I own that are focused outside the U.S. :

$EWW I own this in the long-term account to get exposure to Mexico
$PBR I own this in the Submarine Basket for Brazil exposure
$ORAN For some exposure across the ocean in France
$IBN I own this in my Swing account for India exposure
$TSM Taiwan semi exposure, for some clients
$TTM I own for some clients, for India exposure

How a post-earnings price move is played by Call Option holders

This is one perspective on how to play an Earnings trade if you own Calls:

1) you own the December 13 Weekly $34 Calls into Earnings for $TOL
2) the initial reaction is up to $35 but it stalls quickly. But, it is still pre-market trading & you can’t exit your Calls yet
3) you short stock to lock in the gains on the long Calls < this is the key step
4) if a big % of Call owners do this step, then the stock fades back to $34
5) if you review the Option Chain, you will notice that the $34 Calls still have good value at the open
6) you win, & win again

Bitcoin

My current trade in $BTCUSD:

20131203-103826.jpg

I get asked frequently about where I trade $BTCUSD. I use multiple exchanges for several reasons (no way I want all my BTC in one place is one reason). If just starting out, I suggest Coinbase.

As for my Futures trading, I don’t recommend this at all except for traders with knowledge in this area (or hedgers, arbs). This is a very immature market – and is rife with fraud.

Earnings trade in JC Penneys

I have a new trade on today for $JCP Earnings:

20131119-171720.jpg

Here is the breakdown:

I am long stock at $8.75
I am long the November 22 weekly $8.50 Puts
I am short the November 29 weekly $8.50 Straddle
This was done for a $.87 credit

On any weakness, I would expect it to be short-term and thus I would sell the long Puts on Friday for whatever value (so much is priced in now). Any bounce, well, I am capped at $9.37 until next Friday.

A look at Exone as it heads into Earnings

I have an existing Long stock position in $XONE with Earnings tomorrow. The other elements to the trade are what I will briefly detail here:

I am short the December 60/55 Strangle (so Calls are covered)
I am Long the November 55 Puts

Let me explain the scenario here:

I want to protect my long stock in the near term (for Earnings) so I added the November Puts just for this purpose. The short December Strangle is not viewed in the context of Earnings as I would expect Dips to be bought.

The Submarine Basket – a look at a new position in Citrix

The Submarine Basket contains stocks that are in a pullback and I determine there is a good floor for price to enter. Because traders are often wrong – and that includes me – I utilize Options to help provide a cushion to work with.

A recent add to the basket is a long entry in $CTXS. Here is my current journal entry:

CTXS

Here is a breakdown:

  • I am long stock at $59.80 (1/3 position size)
  • I am short the November 60 Straddle (1/3 position size each)
  • I have a $2 Options Net (the cushion)

Here are a few scenarios that outline what the next step is based on what price does:

1) The stock goes nowhere until Friday expiration. The Straddle will be very cheap to buy back. I will then resell the same (or a Strangle) for the next expiration – to increase the cushion (would more than double)

2) The stock is $61 near the close on Friday. I would sell Calls for the next expiration to buy back the short November 60 Calls. This will be done for a credit (unless I move up a strike)

3) The stock is $58 near the close on Friday. I would sell the same strike Straddle for the next expiration & use the proceeds to buy back the short November 60 Puts. This Options Net would still increase some but the stock piece is now at a loss

4) The stock is $58 near the close on Friday. I would sell the same strike Straddle (or more likely a Strangle) for the next expiration. I would let the stock get Put to me at $60 (1/3 size) bringing my long stock position size to 2/3. This Options Net would increase some but the stock piece is now at a loss